New Zealand Prime Minister Jacinda Ardern's determination to take some Manus Island asylum seekers to New Zealand could be undermined by detailed allegations of drug taking and sex with minors contained in a PNG-Australia government intelligence cable.

Intelligence advice sent to Canberra from Port Moresby last month describes shocking behaviour from residents at the now-closed Australian Regional Processing Centre on Manus Island. It's likely to raise the stakes in what has become a thorny diplomatic issue.

"In addition to broader allegations of drug taking and dealing (Marijuana), there were overarching community concerns regarding allegations that some residents were engaged in sexual activities with underage girls", states.the cable, a copy of which has been obtained by The Australian Financial Review and Fairfax New Zealand.

It states that "some residents were renting rooms throughout Lorengau and luring underage girls between 10 and 17 years of age, with money, goods and food".

It will put renewed pressure on the 37-year-old Prime Minister's push to get up to 150 Manus Asylum seekers re-settled in New Zealand.

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The revelations come amid rising levels of frustration within the Australian government with Ms Ardern, who is seen to be stirring the pot in what Canberra views as a domestic policy issue that, after a rancorous decade, is close to resolution.

The AustralianFinancial Review understands the Turnbull government is unhappy with what it views as Ardern's "moral posturing and naivety" on the matter, after Ms Ardern said earlier in the week "I think it's clear that we don't see what's happening there as acceptable, that's why the offer's there."

It's understood the Australian government believes Ms Ardern is being pressured by the New Zealand Greens, on whom the new Labour-NZ First government relies on for confidence and supply.

The Australian government is concerned about the messages Ms Ardern is sending to people smugglers.

"The smugglers are watching every interaction between governments in the region on this issue and looking for a chance to restart their businesses", said one senior Australian government official who declined to be named.

"They observe the statements of new leaders very closely and if they see a sign of policies shifting or changing, they take advantage of that".

There are also concerns Ms Ardern's actions on this issue could damage diplomatic relations between the two countries. This comes after Foreign Minister Julie Bishop said prior to New Zealand's September 23 election that she could "find it very difficult to build trust" with an Ardern-led Labour government.

Australian officials are understood to be perplexed about why Ardern's rhetoric has ramped up. Ardern's party has had a long-held policy to double NZ's refugee quota to 1500, but had not previously voiced opposition to the way the previous National government had handled the issue. Australia's humanitarian intake in 2015-16 was 17,555.

NZ government sources say Ms Ardern was given the brush-off by Turnbull earlier this week after she voiced her intention to have a "more substantive" talk with him on the asylum seeker issue on the sidelines of the East Asia Summit in the Philippines. The pair met in the closing stage on the Summit, but not before what was understood to have been intense back-channeling between their staff, including a meeting between their chiefs of staff.

"The relationship with Australia is strong. The offer to take 150 refugees from Manus Island and Nauru remains on the table, but clearly it's up to Australia to take up that offer," said a spokesperson for Ms Ardern.

"In event the offer is accepted, all refugees will undergo comprehensive screening and assessment processes that includes credibility and risk assessments and security checks.

"Refugees who do not meet New Zealand's relevant immigration policies, security and biometric checks and risk and health assessment are declined," the spokesperson said.

While the report states that police have had unable to investigate the claims, as they had not been reported, the local Provincial health Authority had written to the Provincial Police Commander expressing concerns about "inha!creased interaction between the residents and the young girls from a health perspective, saying they had seen an increase in sexually-transmitted infections and HIV".

"We were also told that some parents were implicated in the conduct of their children", the intelligence cable says.

As a result, the local Deputy Mayor, Kakao Karani was concerned about "the closure of the Regional Processing Centre and the relocation of the residents closer to town".

According to the cable, local Manus Island residents were also "unhappy with the stigma attached to the girls who engaged in the activities and the number of children born from the 'relationships' (reported at least ten at the time of our last visit)."

A spokesman for the Turnbull government confirmed the report was accurate.

Minister for Immigration and Border Protection Peter Dutton declined to comment, but a spokesperson referred to comments earlier in the week.

"We believe that if you sent people to New Zealand at this point in time that the people smugglers would again be able to say, 'look; you've only got to wait a couple of years on Manus Island or on Nauru and you'll go to New Zealand – good welfare system there, good health system, good education and housing system – and then you'll be eligible to go to Australia'." Mr Dutton told an Adelaide radio station on Monday.

Stacey Kirk is a senior political reporter with Stuff (formerly Fairfax New Zealand)